At
the beginning of September, to address the market demand for solutions that
enable greater supply chain agility (in terms of visibility and event management)
and bottom line impact, SynQuest, Inc. (NASDAQ/SC: SYNQ), a provider
of supply chain planning (SCP) solutions, and two privately held supply chain
event management (SCEM) providers, Viewlocity, Inc. and Tilion, Inc.,
announced that they had entered into definitive agreements to merge the companies.
SynQuest and Viewlocity, both based in Atlanta, GA will merge operations, and
Boston, MA-based Tilion will merge into the combined company to provide approximately
$13 million in cash.

At
first sight, one could even notice a prospect of differentiating the combined
value proposition. On one hand, to differentiate itself, Viewlocity has long
been harnessing SCEM to provide a complete network perspective, from supplier
to shipper, in a single, integrated portal. To that end, its TradeSync
product is aimed at helping manufacturers not to be distracted by the noise
that typically results from having an overload of information. Thus, not only
will the user get an alert if something goes wrong and an order is going to
be late, but he/she will also get an advice about alternative remedies, as well
as the option to conduct a number of what if' scenarios to find the true ramifications
of opting or not for each alternative. The latest product release also features
performance analytics in terms of trend-based KPI monitoring — when negative
exceptions occur, one can drill down to understand the root cause. Addressing
causes typically prevents errors and snowballing negative effect downstream
the supply chain.

This
is Part Two of a two-part analysis of recent merger announcements.

Part One detailed the announcements and began a Market Impact.

SynQuest

SynQuest, on its hand, was one of the first vendors to integrate advanced planning and scheduling capabilities with manufacturing execution. Its offering is an attractive candidate for mid-market companies that rely on precise synchronization around production and distribution scheduling. SynQuest has found particular success in the automotive (Tier 1 and OEMs) and electronics industries characterized by repetitive/rate-based manufacturing, although its solutions have also been implemented in process manufacturing environments, such as chemicals and pharmaceuticals, but more as the exception.

At
the beginning of the year, the company rolled out SynQuest 7.0, a suite
of collaborative planning solutions, which covers high-end strategic, operational
and tactical collaborative (web-based) planning. Enhancements included improvements
to the dynamic sourcing engine, new functionality focused on product-line profitability
analysis, material substitution, returnable container planning, and advanced
supplier collaboration. The product is aimed at addressing the following five
complex planning tasks:

Sales and operations
planning (SOP) with its Tactical Planning and Open Demand modules,
providing integrated views of the demand/supply chain and geared to maximizing
profit by simultaneously rationalizing demand volume and revenues against
constraints, lead times and supply network costs.

Inbound planning
with SynQuest Inbound Planning Engine (IPE) which helps enterprises
to coordinate the flow of materials from several thousand suppliers to arrive
at just the right time for manufacturing or assembly, and at the lowest cost.
This solution, developed with Ford (see SynQuest,
Ford Deliver a Novel Application for Inbound Logistics), performs global
supplier network optimization analysis by simultaneously evaluating many factors
(from container costs to inventory and transportation costs) to produce a
plan for supply chain operations.

Manufacturing
co-ordination via its Dynamic Sourcing, Virtual Production,
Customer Service and Order Promising modules, all aimed at determining
how to manufacture orders as fast and reliably as possible at the lowest production
cost.

Supply chain
order co-ordination with its Dynamic Sourcing and Order Promising
modules for companies that produce across multiple facilities -- enabling
them to promise and co-ordinate complex orders to meet due dates at the lowest
delivered costs.

The
above impressive functional footprint that caters for business, profit, distribution/logistics,
and manufacturing planning, with all the horizontal and vertical sector finesses
like finished goods vehicle scheduling, trim/off-cut optimization and contingency
planning, has been underpinned by an n-tier architecture. Preferred platforms
are UNIX and Windows NT, with Microsoft BizTalk and XML
providing its primary on-going development path and foundation for Web services
support. SynQuest applications have been available for UNIX since the company's
inception in 1994 and these are probably the most mature of its offerings. Windows
NT followed as a server platform a few years later and, most recently, SynQuest
partnered with IBM to port its manufacturing management application to
iSeries Server (see SynQuest
Ships Manufacturing Software for AS/400). The key technology that ensured
fast implementations in the past is the software's open, data-driven architecture
that connects to anything from legacy systems to Internet-based applications,
and lets customers leverage data on-hand to model and solve problems without
heavy custom programming.

Challenges

However,
the existence of a prospect (i.e., an enhanced combined offering) does not necessarily
grant it will happen either any time soon or ever, as both SynQuest and Viewlocity
will have joined the matrimony with their baggage as well. Viewlocity has the
integration technology legacy from its inception as one of the first (formerly
known as FronTec AB) enterprise application integration (EAI) vendors.
The culmination of its transition from EAI vendor to SCEM vendor took place
this year with the sale of its integration products and operations to a systems
integrator. SynQuest, a renowned SCP vendor, has nonetheless struggled to gain
mind and market share ever since its IPO in 2000 (see SynQuest
Posts Mixed Results). Despite partnering mutually and with other providers
(see
J.D. Edwards Names SynQuest Preferred Solution and SSA
Seeks Support from Synquest), neither company has ever experienced a merger
with and integration with another company, and both have shown irregular sales
execution and have gone to the market with too complex marketing messages in
the past.

The compound company now has to make tough and quick decisions on the combined product range and its technology underpinnings. Although SynQuest has a "quick-solving" execution capability that can be linked with Viewlocity and Tilion's event management, it is still not a real-time but still rather a batch-mode architecture, so the synergies will not be immediate, as a real-time architecture development effort will require significant time and other resources. Also, the official press release is awfully quiet about Tilion's possible contribution to the merger (e.g., whether that could be some of its SCEM functional components that cater for integration, process management, agent or analytics aspects of event management, or its application service providers (ASP) expertise) other than inherited cash position, which should make its current staff members and customers quite disconcerted.

Consequently, the imminent challenge lies in coordinating current sales activity and pipeline management, since the companies must pursue their respective sales opportunities as they concurrently integrate the sales forces and cross-train them. But the challenge for the respective customers of former constituent companies in the long term is that these will continue to focus on their fortes (e.g., execution-oriented solutions rather than traditional SCP and vice versa). Although customers should gain from having a more comprehensive system for planning and event management once the products are integrated, there will still be a need to integrating it with a back-office functionality, which the above-mentioned ERP vendors may even offer at this stage.

Finally, while the merger is justifiable it does not provide the new entity with almost any room for mistakes. SynQuest also needs to quickly figure out the best combination of its disparate products and technologies and articulate a clear and assuring message to the market that it can deliver a strategy for the planning, executing, and adaptive management of supply chains in a foreseeable future.

User Recommendations

While the above merger could be synergistic in the long run, treble cultures, integration issues, and positioning of likely redundant SCEM components are to be expected. Still, combined respective customers should consider this event as a move toward a more viable position for their IT investment, given a likely growth in SynQuest's R&D and sustained support for the ongoing development of its products, likely by deepening its ability to provide adaptive supply chain with real-time decision support. Enterprises should nevertheless monitor the consistency between the announced strategy and the new company's actions in continuing to support all of the former products strategically.

Consequently, until the merger is consummated, users evaluating the above individual products should exercise moderate caution, keep themselves informed, and consider generally available (GA) functionality only. Existing users should urgently clarify their support status and the long-term product development and migration strategy with the new management. Customers adopting the first integrated products in the future should anticipate significant changes in later versions of the products after first users' experiences and product refinement requirements.

Users
should ask the following questions when evaluating the SynQuest-Viewlocity-Tilion
combined offering:

Are there any
price advantages offered to existing clients who elect to purchase/migrate
to the future integrated products?

What technology
will be used to integrate the applications?

Will (and when)
the applications share a common server platform and user interface?

What assurances
can the company give that installed products will be supported if the merger
fails to materialize in the long run?